Amazon’s revenue increases nearly 23% in Q1

By Thad RueterSenior Editor

The e-retailer releases its Q1 financials as it seeks to beef up its “last mile” delivery capabilities and the benefits of its Prime membership program. While revenue approached $20 billion, net income was only $108 million as Amazon spent heavily on technology, content and fulfillment.

Amazon seeks to beef up its "last mile" delivery capabilities.

Amazon.com Inc.’s revenue hit $19.74 billion in the first quarter of 2014, up 22.8% from the same period last year. The e-retailing giant released its financial report this afternoon after it had announced a new grocery service for its Prime free-shipping program members and sought to beef-up its “last-mile” delivery service, reportedly in testing.

• Net sales of $19.74 billion, a 22.8% increase from $16.07 billion in the same quarter in 2013. Of that revenue, $15.70 billion stemmed from Amazon selling products itself to consumers, what the e-retailer terms “net product sales”—up 18.3% year over year. The rest, nearly $4.04 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 44.3% from last year.

• North American net sales of $11.86 billion, up 26.3% from approximately $9.39 billion for the first quarter of 2013. North America accounted for about 60.1% of sales in the first quarter of 2014, compared with 58.4% in the same period in 2013.

• International net sales totaling $7.89 billion, up 18.1% from $6.68 billion in 2013. International accounted for about 39.9% of sales in the fourth quarter, compared with approximately 41.6% in 2013.

• Worldwide sales of books, music and videos increased 8.1% to about $5.47 billion from $5.06 billion, while electronics and other general merchandise increased 27.5% to nearly $13.02 billion from $10.21 billion in the same period in 2013.

• Net income of $108 million compared with net income of $82 million in the same period in 2013.

• Spending on marketing increased 27.7% to about $807 million from $632 million in the first quarter of 2013.

• Spending on technology and content increased 44.2% to about $1.99 billion from $1.38 billion.

• General and administrative spending increased 39.2% year over year to $327 million from $246 million.

• 244 million active customer accounts. "Customers are considered active when they have placed an order during the preceding 12-month period," Amazon says.

In advance of its Q1 earnings, Amazon announced the launch of Prime Pantry, a grocery-shopping digital storefront that allows Prime customers to virtually fill a 4-cubic-foot box with up to 45 pounds of items from the e-retailer’s new pantry section and pay a flat shipping fee of $5.99.

"Based on the recent expansion of Amazon Fresh and the launch of Amazon Dash and Amazon Pantry, it is clear Amazon is increasing its focus on building a more robust consumables business, which we think could have broader implications for traditional hardlines retailers like Wal-Mart, Target and even Costco," write Wells Fargo Securities analysts in a research note. The handheld Amazon Dash device enables consumers to add items to their online shopping lists via voice commands or bar code scans. Amazon Fresh is the retailer's grocery home delivery service.

Reports also surfaced today that Amazon was testing a “last-mile” delivery service—that is, using its own trucks and drivers to cover the final distance to customers’ delivery addresses. Amazon had no immediate comment, but the e-retailer has posted a job listing for a professional to lead “a team of talented software designers in the design and development of the next generation of Last Mile devices.” During the conference call with investors today, Amazon chief financial officer Tom Szkutak declined to comment on the reports, saying only that Amazon "continues to work to [get] closer" to consumers, an apparent reference to the e-retailer's growing distribution network and its push to put fulfillment centers near metro areas.